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Are price comparison websites still fit for purpose?

Price comparison websites have revolutionised the way we buy products such as insurance and energy, saving UK consumers billions each year, but are they still fit for purpose amid growing criticism about their operations and looming threats, both big and small?

Comparison websites
Source: Bloomberg

Price comparison websites have become the essential middlemen helping UK consumers save both time and money, virtually guaranteeing that all of us save every time we visit, whether we’re looking to switch energy providers, are searching for a new insurance policy or on the hunt for a new credit card.

The emergence of price comparison sites was revolutionary and thrusted retail financial services into the digital age but the industry has been heavily criticised for fuelling an ineffective model that only promises customers savings if they keep coming back to earn them commission, and for creating a marketplace that penalises those customers that remain loyal to their suppliers.

With the industry facing several challenges, both big and small, we examine whether price comparison websites are still fit for purpose.

What are price comparison websites?

Price comparison websites aggregate the policies and prices on offer from different suppliers of various financial services. Predominantly, customers use these sites to find deals on gas and electricity, insurance and credit cards but also a swathe of other products. This allows customers to view a wide range of deals in one place, helping them to quickly find cheaper deals. The biggest price comparison websites in the UK include Group, GoCompare, Comparethemarket, Confused (owned by Admiral Group), and uSwitch (owned by ZPG Group).

These price comparison websites have grown in prevalence since surfacing two decades ago. The UK Competition and Markets Authority (CMA) estimates 85% of all UK internet users have used a price comparison website at some point and, supported by calls from regulators and the government, they have become an essential tool for anyone looking for a new policy or to switch from their current provider.

Price comparison websites only reward customers if they keep coming back

And why wouldn’t they? Each time a customer uses a price comparison site it is almost certain they will be able to yield a saving on their home insurance or find a credit card with a better rate, and the government has promoted them as part of efforts to save consumers money, particularly in the energy sector.

In fact, these sites have won us over so much that they are often described as ‘unbiased’ by consumers and considered by some to be run ‘for the benefit of consumers’, according to the CMA’s investigation report on price comparison websites released last year. At face value, it’s an understandable perception from the public. They have the support of the government, are free to use, save consumers money, and invite fiercer competition from providers. But, at the bottom line, price comparison websites have the same goals as any other company: make profit and create shareholder value. GoCompare and Moneysupermarket saved UK consumers over £3.2 billion on their own last year, but they also made combined pre-tax profits of £127 million and returned £100 million to shareholders.

Price comparison websites provide their services to the public free of charge and instead make their money by charging commission on the leads generated for providers. The gas supplier, home insurance policy provider or credit card company pays the price comparison site for each customer they acquire through their site. You can argue price comparison websites benefit both consumers and providers, but you cannot describe them as unbiased or operating without motive.

Before we were able to access so much choice the name of the game was loyalty (or at least we thought it was). Banks, energy suppliers and insurers rest assured that customers would largely stay put once they had been acquired. Now, customer churn is rife as they flock to find better deals. It is fair to argue that unsticking customers from long-term providers is a positive, giving big banks and utility firms a long-awaited kick to make them work for their customers and compete more vigorously on price. But there is one snag: customers only yield the true benefits of price comparison sites if they revisit them each year.

Price comparison websites create flywheel of engagement

The intense focus on price has led to a race-to-the-bottom among providers. Cash is king, and customers are often enticed by a deal based on its price before they even manage to find out who the provider is or whether it’s the policy they need. It is thought many providers now acquire certain customers through price comparison websites at a loss because they have to offer rock-bottom prices to attract eyes away from rival deals and cough up the cash to the website for generating the lead. But this model has had severe consequences for the market and consumers.

Put simply, providers lure in customers from comparison sites with cheap deals which then rise to considerably more expensive tariffs or policies after a year or two. For all the times that the television, whether it be a moustached opera singer, a meerkat or a man in hot pants, tells us we need to switch our energy supplier or find a better mortgage rate, those that are actually providing us with the services want the complete opposite.

Read more on the effect of GDPR and how big tech is responding

Price comparison sites have created what could be called a flywheel of engagement – customers have to keep switching if they are to avoid their bills creeping higher, and every time they do the price comparison sites take their slice of commission. It is widely agreed price comparison sites save us money, but you could argue this is because customers find themselves on such expensive deals further down the line because they also encourage providers to raise prices in the future.

Price comparison websites: skewed results

‘Transparency is a mantra in the modern world of finance. But the demand for transparency in intermediation is a sign that intermediation is working badly, not a means of making it work well,’ – John Kay, author of ‘Other People’s Money, masters of the universe of servants of the people?

Price comparison websites have won our trust by providing us with a service that saves us money from sectors that the public have no problem believing are ripping them off. Bankers and insurers haven’t held an exemplary reputation among regular communities for decades and people are showing their disdain with the biggest energy suppliers as they continue to leave in their tens-of-thousands to small, independent suppliers.

Read more on the Big Six suppliers and whether they’re losing their grip on the UK energy market

The idea that we aren’t rewarded for loyalty and that we are constantly being overcharged for unfulfilling but essential services fuels the belief that price comparison sites are the consumer’s friend. But these middlemen are not striving to save us as much money as possible, but find the balance by selling us products that do save us money as well as make them profit. We save money using price comparison sites, but the question is could we be saving considerably more?

In addition, the ruthless competition on pricing has raised concerns that people are buying products or services based on the cost even if it is unsuitable or not what they need. The Financial Conduct Authority (FCA) said in 2016 that a ‘key concern’ was the ‘expectation gap’, where ‘people believe they are getting a good deal because they are saving money initially, only to find they are not covered as comprehensively as they thought when they make a claim’.

Further woes spawn from the anti-competitive nature of ‘most-favoured nation clauses’ that price comparison sites use when striking contracts with providers to prevent them from selling the same products or services at a cheaper price on a rival price comparison site. There have also been concerns about how providers that do not have a relationship with the price comparison website (as in, it doesn’t earn commission or payment) are displayed online and presented to customers, with sites prioritising and promoting commission-earning or sponsored deals. This also applies to those companies like Admiral that sell their own insurance through their own price comparison websites.

The CMA ‘recommended’ measures last year to make it clearer about how the results on price comparison sites are skewed and why. This is supposed to be done under its ‘CARE’ system to ensure price comparison sites are being Clear, Accurate, Responsible and Easy to use. Still, looking at most of the sites it is still very unclear about how or why you are being offered those deals specifically apart from the likes of tags that mark sponsored promotions (which are not new).

Some providers shun price comparison websites

Those firms that refuse to pay price comparison websites for their services make a point about it, with adverts often highlighting that their deals are only available directly through them. Direct Line is a prime example, having previously told consumers to ‘cut out the middle man’ and go straight to them to get an even better deal.

This strategy, however, comes at a cost. One of the main benefits for providers that use price comparison websites (and an upside to relentless focus on price) is there is less of a need for them to spend on advertising. Instead, they rely on the price comparison website’s barrage of advertising to attract them to the site, where they can offer their product or service. But companies like Direct Line have to manage their own marketing efforts.

This presents an interesting debate. The CMA declared that the scale and motivation of price comparison websites to advertise meant they were ‘a relatively low-cost sales channel’ for suppliers to secure new customers, which ‘can feed into better offers to consumers if lower costs are passed on by suppliers.’ Still, despite the CMA’s stance that ‘many’ providers can secure customers at a cheaper rate than without them, it’s fair to suggest any savings made in the marketing department are not being passed on to consumers but to the price comparison sites in the form of commission or sponsorship. It is equally fair to assume the millions spent by price comparison sites and providers (which still need to retain the reputation of their brands), plus the cost of the middleman, is also passed on to consumers.

How much time and money do price comparison websites save consumers?

With fair questions arising about the real savings, some will argue that price comparison websites help us save an even more valuable asset: time. However, consumers are having to put in more time and effort than ever before if they really want to get the best deal. Considering the use of most-favoured nation clauses and the fact some of the biggest players abstain from listing their offers on any price comparison sites means consumers cannot use just one site to get a clear picture of all the deals on offer. Quite simply, not every mortgage, travel insurance policy or energy bundle is available on every price comparison site, or even at all.
The CMA’s advice to consumers is evidence that the model adopted by price comparison sites is losing its ability to save us time, stating that people should use several sites to make sure they see all the products and services available.

Which?: price comparison websites are inconsistent and offer lack of choice

This apprehension has been echoed recently by a report from consumer group Which? that revealed a ‘picture of inconsistencies and a lack of real choice that could be leaving consumers at risk of purchasing policies that simply don’t meet their needs.’ Having analysed 21 insurance brands offered on GoCompare, Comparethemarket, Confused and Moneysupermarket, it found six in ten of the policies sold did not match the actual policy that was purchased. This included false promises of courtesy car provision and ‘unreliable’ levels of cover with some policies only providing half of the actual cover limit that was sold.

The report also highlighted how the relationships between price comparison sites and providers can impact consumers, finding that many of the top results presented were sold by only a handful of brands – with the top 30 deals offered by as few as 12 suppliers in one case. It also pointed to the minimal differences in price between similar levels of cover offered by various brands owned by just one parent firm, with Admiral being shoved under the spotlight because there was ‘little to choose’ between the offers available by its brands. The same policies offered by different brokers also caused a similar problem.

The ultimate message from Which? is on the ‘expectation gap’ which the FCA has previously worried about, urging consumers ‘not to rely entirely on the policy details published on price comparison websites.’

Comparing the price comparison sites: how have they performed?

All of the major UK price comparison sites have delivered lifts in revenue and profit over the past two years. Below is a breakdown of the performance by the owners of the biggest UK comparison sites.

Moneysupermarket vs GoCompare: financial results

Moneysupermarket boasted better gross profitability than the other purest play listed in London, GoCompare. Although Moneysupermarket is over twice the size of GoComparre in terms of revenue, the latter delivered higher rates of growth in the first half of 2018 in terms of revenue, profit and its interim dividend.

  Moneysupermarket GoCompare
Time period 2016 2017 H1 17 H1 18 2016 2017 H1 17 H1 18
Revenue 316.4 329.7 165.3 173.7 142.1 149.2 75.8 75.8
Gross profit 236.8 244.5 120.4 124.4 100.9 106.7 51.8 53.7
Pre-tax profit 91.3 96.1 49.5 51.7 21.6 30.7 14.7 15.9
EPS 13.5p 14.4p 7.4p 7.9p 3.8p 5.8p 2.8p 3.1p
Dividend 9.85p 10.44p 2.84p 2.95p 80.1p 1.4p 0.7p 0.8p


Operationally, Moneysupermarket is currently in the midst of implementing its ‘Reinvent’ strategy, which is being spearheaded by a £5 million investment in its online services to improve the customer journey. This will involve personalising the main Moneysupermarket site, improving its mobile platform (boosted by its recent £40 million acquisition of Decision Tech) and launching a new mortgage price comparison site through a fintech joint venture company, Podium.

At GoCompare the focus this year has been on integrating MyVoucherCodes, a retail voucher site for ‘savvy savers,’ which it acquired in January and folded into the group within just six weeks. That was followed by the acquisition of Energylinx. It also launched a customer reward programme in April. GoCompare has also made moves in mortgages, increasing its investment in fintech start-up, MortgageGym, in July.

Admiral: making progress but international sites struggle

At its core, Admiral is an insurer operating in the UK and Europe but it is the owner of in the UK as well as multiple international comparison sites: LeLynx in France, Rastreator in Spain, and, most notably, in the US. Profit from Confused rose to £5.8 million in the first half of 2018 from £4.5 million the year before, but is still considerably lower than what it was earning in 2016. Its international comparison operations, however, are stuck in the red after producing losses of £13.1 million in the first half of 2016, £2.1 million in 2017 and £3.2 million in the first half of this year.

Time period 2017 2017 H1 17 H1 18
Admiral net revenue 1016.8 1128.9 550.6 598.1
 - of which from price comparison 129.2 143.6 72.5 76.6
Admiral pre-tax profit 278.4 403.5 193.4 210.7
 - of which from price comparison (2.9) 5.4 2.4 2.6
Admiral earnings per share 78.7p 117.2p 57.3p 61.6p
Admiral dividend 126.3p 107.5p 51.5p 58p


Internationally, its US site is the focus. Admiral is continuing to invest in, which is partly why the overall international segment is still suffering losses. Still, its international comparison sites are expected to incur a share of loss of $8 million to $13 million in 2018 as a whole (equal to £6.1 million to £10 million).

ZPG: uSwitch owner becomes takeover target after failed GoCompare bid

ZPG is split broadly between property services and comparison sites. Its two primary comparison sites are uSwitch and Money, with its property division spearheaded by sites like Zoopla and PrimeLocation.

  ZPG Group
Time period 2017 2017 H1 17 H1 18
Revenue 197.7 244.5 117.9 156.9
 - of which from price comparison 111 122.2 62.1 82
Adjusted Ebitda 99 109.2 45 63.4
 - of which from price comparison 46.5 48.5 20.5 28.2
Pre-tax profit 46.2 48.1 22.5 29.5
Earning per share 8.9p 8.8p 4p 5.1p
Dividend per share 5.2p 5.7p 1.9p 0p


Having failed in its multiple attempts to buy GoCompare, ZPG Group has since become a takeover target itself after technology investment firm Silver Lake made an offer equal to £4.90 per share. ZPG has recommended the offer, but it also cancelled its interim dividend as a result.

Will consolidation among price comparison websites continue?

Despite its evolution, the industry remains fragmented for several reasons. One of these is the wide variety of products and services that are suitable for price comparison sites. As stated earlier, consumers mostly hunt for energy, insurance and credit products on these sites but the list is endless. This has presented opportunity for different sites to make waves in different areas. For example, a new entrant named Beyond has caused controversy for its light-hearted approach to marketing its price comparison service for funerals, demonstrating the slew of products that are suitable. The attraction of owning both a comparison site to flog your own products on has also spurred on merger and acquisition (M&A) activity.

Some more recent deals include ZPG Group’s purchase of Money, which offers over 60 different products, and GoCompare’s purchase of Energylinx, an energy switching and comparison service with ‘more energy supplier relationships than any other UK comparison provider.’

Interestingly, reports from Bloomberg have suggested GoCompare is itself a takeover target, although aiming to stay independent following talks with several potential suitors, including US private equity firm KKR.

In turn, Esure, which spun out its holding in GoCompare in 2016, is also looking set for some M&A activity following a £1.2 billion bid from Bain Capital to take the company private, with the insurer ‘minded to recommend a firm offer’ of 280 pence per share.

The emergence of private equity that appears to on the horizon could suggest others see a better future for price comparison sites outside the scrutiny of public markets, particularly after the owner of Comparethemarket, BGL Group, scrapped its plans for a £2 billion London listing late last year after the Canada Pension Plan Investment Board bought a 30% stake for £675 million.

While smaller players will continue to be swallowed up the chances of two larger players merging is more uncertain. ZPG, the owner of uSwitch, saw its £460 million (110p) offer for GoCompare rebuffed last year after the unsolicited bid was deemed ‘highly opportunistic,’ but it has since recommended a takeover offer from Silver Lake. From the CMA’s point of view, competition between price comparison sites is good for consumers so whether or not it would prevent such mergers is uncertain.

However, one possible new entrant may change the CMA’s view and force the price comparison sites to band together.

Is Amazon the biggest threat to price comparison websites?

Reports suggest it is early days and there has been, unsurprisingly, no confirmation from the US giant, but it appears Amazon is once again looking to stretch its legs in yet another industry. Reuters reported in August that Amazon was in talks with some of the largest insurers in Europe about their feelings toward listing their products and packages on a new UK comparison website.

Read more: Amazon moves into the prescription business

The sheer size of Amazon, which makes far more from its cloud-computing operation than it does delivering goods to our doors, will give it the ability to simply undercut existing sites using its scale. At the bottom line, should Amazon decide to set up its own site then it can afford to cut the commission it charges providers by as much as it has to in order to run the competition out of business.

Read more: Amazon Prime Day propels the flywheel

Having said that, Amazon would not be the first online giant to enter the market and fail. Alphabet had its own price comparison site named Google Compare in operation between 2012 and 2016 focused on insurance, mortgages and credit cards before admitting it had not been as successful as anticipated.

Is it time price comparison websites adopt a new approach?

‘The direction of travel in this space is all toward a service like Look After My Bills. The energy market simply doesn’t work for customers because they don’t keep engaging with the market’ – Will Hodson, co-founder of automatic switching site Look After My Bills.

A valuation of £4 million may not seem much to public markets nor much of a threat to the existing market, but one company with that price tag is adopting a new approach that the price comparison sites should be extremely concerned about. Will Hodson and Henry de Zoete recently secured a record £120,000 for 3% of their business named Look After My Bills on the BBC series Dragons Den, whereby investors like Peter Jones and Deborah Meaden are pitched new business ideas.

In a nutshell, rather than providing a service that allows consumers to manually switch their energy supplier the site automatically moves its customers to the best deal it can find from what it deems to be a reputable supplier. The idea is based on two simple facts. Number one, consumers have to keep engaging in the market to get the best deals and, number two, most consumers still don’t engage with the market and when they do it is often reluctantly. More effort has been put into encouraging consumers to switch their energy suppliers using price comparison websites than any other product but still more than half of all households don’t switch.

Look After My Bills, which aims to add a broadband-equivalent service later this year, fended off concerns about automatically transferring customers to new suppliers on their behalf and their ability to remain independent considering they still plan to make their money by charging providers for new customers they provide. The angle is one based around ethics. The company concedes that its customers may be able to get a cheaper deal from a supplier that is not on their list (just like existing price comparison sites), but installs the idea that it only connects its customers to reliable, trustworthy suppliers.

Look After My Bills, which states people get ‘ripped off’ by the energy market, does not aim to just overhaul the model of price comparison sites but provide a way for consumers to save money without the need to constantly return to price comparison sites, and stoke providers to focus more on consumers. As Hodson put it: ‘If a supplier does not want to get on board a service that provides customers with the best deal year-on-year, I’m not sure that’s the type of company we want to be moving people to.’

There are a few kinks in the model and a hint of hypocrisy in the company’s view but, with 60,000 to 70,000 customers having already made the switch and 250,000 to 300,000 signed up to the site, Look After My Bills may be the glaringly obvious solution to the problems hindering price comparison websites.

The CMA believes that the intense competition between price comparison sites is good for consumers and there is little disagreement that they have, overall, been beneficial to households in the UK. But their ability to save us time is waning and the real reasons customers yield savings is not as clear-cut as it appears. If the real and only goal of price comparison sites is to save customers money then why isn’t it run as a singular, governmental or not-for-profit operation that has the sole intention of displaying all the products and services on offer without the smokescreen that we all have to look through at present? Otherwise, price comparison sites will have to become significantly more transparent to keep consumers on side.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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